Amid rising demand during the dry season and the risk of power plant outages, concerns are mounting in the Philippines over tight electricity supplies. The Energy Regulatory Commission (ERC) has noted that prices on the Wholesale Electricity Supply Market (WESM) could increase by approximately 4 pesos per kWh.

This increase is due to a combination of factors, including high temperatures, the shutdown of some power plants, and rising fuel costs.

These conditions are also causing instability in the power supply at the regional level. For instance, Boracay’s supply capacity has not kept pace with the surge in electricity demand fueled by the tourism recovery, prompting the use of generators in some areas. Although transmission operators aim to avoid power outages through future infrastructure improvements, reliance on backup power sources continues to some extent.

Overall, the Philippine power system is in a precarious state, caught between rising demand and supply constraints. This environment creates a structure that drives up electricity costs and encourages the use of alternative power sources, such as generators.

Source: BusinessMirror, The Manila Times

PSR Analysis: What is noteworthy about this news is not the existence of the generators themselves, but rather, the manifestation of power shortages as price increases, which directly influence demand-side behavior. Generators have been used during supply shortages in the past. However, the confirmation of their use at the same time as the projected rise in WESM prices indicates that we have entered a phase where both electricity costs and supply risks are recognized simultaneously.

Of particular importance is the fact that the grid’s supply capacity is insufficient to handle even relatively predictable factors, such as the recovery of tourism demand coinciding with dry-season demand.

Under these circumstances, demand-side actors may increasingly take proactive steps to supplement their power supply, rather than passively receiving electricity based on costs and supply conditions. Though still limited in scope, in an environment where electricity price fluctuations and supply concerns occur simultaneously, this can be interpreted as a sign that generators’ role is expanding from “emergency use” to “part of supply-demand adjustment.” PSR

Akihiro Komuro is Research Analyst, Far East and Southeast Asia, at Power Systems Research

In Southeast Asia, where the delta variant of the COVID-19 is spreading rapidly, business activities are becoming stagnant. In response to government regulations and the rapid increase in the number of infected people, major Japanese companies such as Toyota and Panasonic have suspended production at some of their plants. In addition to the decline in local sales, the disruption of the supply chain has also affected production in Japan.

Toyota has sequentially shut down all three of its plants in Thailand since July 20. The company has not yet decided when to resume operations because it has been unable to procure parts due to an outbreak of infection at one of its customers’ plants. Honda also shut down one of its plants in Thailand from August 3 to 5.

Since June, countries in Southeast Asia have tightened restrictions on activities in response to the COVID-19.

Thailand has extended the deadline for sealing off Bangkok and other cities until the end of August. Factories will be allowed to operate but will be ordered to close temporarily in the event of a mass infection. Malaysia continues to impose strict restrictions on economic activities in Kuala Lumpur and other cities, setting limits on the types of businesses that can operate and the number of people who can come to work.

Indonesia’s medical system is under pressure due to the rapid increase in the number of infected people, and there is a growing trend to send expatriates and their families home. Toshiba is allowing expatriates and business travelers to work from home and return to their home countries if they wish to do so. In Vietnam, a curfew in Hanoi and Ho Chi Minh City has hampered logistics and other operations. The Philippines will tighten restrictions on movement and activities in the Manila metropolitan area from April 6, introducing the strictest of the four measures.

Parts produced in Southeast Asia are also exported to Japan, and the impact on domestic production activities has been spreading. Japanese companies have been shifting their production to Southeast Asia. The Association of Southeast Asian Nations (ASEAN) accounted for about 16% of Japan’s total imports in 20 years.

Toyota has decided to temporarily shut down its three plants in Aichi Prefecture due to the stagnant supply of parts from Vietnam. Honda is also planning to suspend its Suzuka Plant for seven days in August due to stagnant parts supply from Indonesia.

Source: The Nikkei

PSR Analysis: Southeast Asia, which has been able to contain the infection better than Europe and the United States, is now being affected by the onslaught of the delta variant. Many foreign companies, not only Japanese but also Chinese, South Korean, and US companies, are operating in Southeast Asian countries, but many of them are being forced to limit their actions in the region. I have heard that security is worsening in some areas, such as the coup d’etat in Myanmar and the demonstrations against the current government in Thailand. In the automotive industry in particular, there is another problem, the shortage of semiconductors, and a combination of factors is slowing down production.

The biggest problem is that it is impossible to predict how long it will take for this to subside. The supply chain will inevitably be affected, with Toyota already temporarily shutting down three of its plants in Japan due to stalled parts supplies from Vietnam, and Honda shutting down its Suzuka plant in Japan due to stalled parts supplies from Indonesia. The spread of COVID-19 infection in Southeast Asia is not only a problem in Southeast Asia. BCP will become even more important in the future. PSR

Akihiro Komuro is Research Analyst, Far East and Southeast Asia, for Power Systems Research